Budgeting For Employee Benefits
A Step-By-Step Guide
More and more companies are starting to realise that in order to remain competitive they must provide employees with more than just a salary - they need to provide employees with a compelling compensation package, including salary and a range of employee benefits.
However, companies often do not have a specific budget for employee benefits. And so business owners and HR Managers believe (mistakenly) that employee benefits will have to wait until a new budget is approved.
Fortunately, it is possible for you to get started immediately. You can provide your employees with great employee benefits with only a small one time cost - or even no additional cost at all.
It's not hard. Just follow this handy a step-by-step guide:
Review Your Current Budget
Take a look at your current budget, and make sure you understand all one time costs, recurring costs and conditional costs:
Identify Transition Points
One year from today, each one of your current employees will have gone through a transition point:
Use these transition points to introduce employee benefits without increasing costs. A few examples below.
Example 1: Replacement
Maung Maung is a Operations Officer earning a salary of MMK 500,000 per month. He leaves your company and needs to be replaced. You offer Kyaw Kyaw, the new hire, a compensation package that includes a salary of MMK 490,000 per month and Mote Poh employee benefits (which costs MMK 10,000* per employee per month, and gives employees MMK 50,000 to 200,000 in free items and discounts per month).
Here's your company's costs:
And here's your employee's compensation package value:
Example 2: Raise
Su Su is a Sales Officer earning a salary of MMK 500,000 per month. She has been with your company for one year, and she is doing excellent work. You would normally offer Su Su a raise of 10% - i.e a new salary of MMK 550,000 per month. But you offer Su Su a compensation package that includes a salary of MMK 540,000 per month and Mote Poh employee benefits (which costs MMK 10,000* per employee per month and gives employees MMK 50,000 to 200,000 in free items and discounts per month).
* For the sake of simplicity, we use MMK 10,000 as a example. See actual Mote Poh Pricing.
Create A One Time Budget
As we have shown above, using from a "salary" model to a "compensation package" model during transition points will allow your company to provide employees with new employee benefits (and thus increase their compensation value) without an increase in costs.
However, many company wish to provide all employees with new employee benefits immediately. In order to do this, you may need to create or find a budget for a One Time Cost - the cost of the employee benefits for each employee before they reach a transition point.
As a simple guide, the one time cost will be equal to number of employees multiplied by the cost of the employee benefit (per employee per month) multiplied by 6. (This assumes that employees will be replaces or earn raises at an even rate throughout the year.)
Additional Budgeting Tips
Drop us a comment below. Let us know about your experience implementing this technique. Or share a favourite budging tips. We'd love to hear from you!
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